gotta update a bit here:
With OS7, suddenly the iCloud music library works on my '09 VW GTi. I did a clean install of the OS on my iPhone 5, and decided not to copy my music directly to the device, and see if it would work. It did. Radio is a little sketchy, but the cloud music library works well.
For reference-my setup is a proprietary cable from the GTi, to a voltage adapter, and then finally a 30-pin to lightning adapter. The iPhone 5 charges, and plays as it should. Can control it from the steering wheel as before.